Oil firms seek full compensation

R. SURYAMURTHY

New Delhi, March 22: State-owned oil firms have asked the government to fully compensate their revenue losses for selling diesel, kerosene and cooking gas at controlled prices.

The three state-owned firms — IOC, BPCL and HPCL — have estimated that they would have to bear Rs 8,200-crore losses in the current fiscal after taking into account a roll-over subsidy announced in the interim budget and contribution from upstream companies.

Pointing to their grim financials, the three refiners have urged the oil ministry to take up with the finance ministry the issue of full compensation at the earliest.

The combined borrowing of the three oil marketing companies (OMCs) as on December 31, 2013, stood at Rs 1,34,000 crore.

Rating agency Moody’s has warned that the failure to fully reimburse the OMCs will be “credit negative”. “While we do not expect the government to under-compensate the OMCs, the credit metrics of the OMCs will weaken should such a scenario materialise as their profits will decline and the borrowings will increase. The extent of the deterioration will depend on the reimbursement shortfall,” Moody’s said.

State-owned oil firms are selling diesel at a loss of Rs 8.37 per litre, kerosene at Rs 36.34 a litre and cooking gas at Rs 650.80 per cylinder. In the first three quarters of the current fiscal, the companies suffered a loss of Rs 47,655 crore on diesel, Rs 22,373 crore on kerosene and Rs 30,604 crore on LPG cylinders.

During the first three quarters, the OMCs reported net under-recoveries of Rs 1,00,632 crore. Their unmet revenue loss stood at Rs 16,889 crore after contribution of Rs 47,971 crore from upstream companies ONGC and Oil India and a budgetary support of Rs 35,772 crore.

Debashish Mishra, senior director at Deloitte India, said, “With the overall under-recovery of over Rs 1,30,000 crore and with GAIL being out of the subsidy burden, ONGC and Oil India are likely to feel the pinch of the additional burden.”

According to the oil firms, based on international oil market trends and the rupee-dollar exchange rate, the under-recovery in the fourth quarter is estimated to be around Rs 42,200 crore.

Of this, the upstream contribution is expected to be about Rs 15,900 crore, leaving an unmet under-recovery of Rs 26,300 crore.

In the interim budget, the finance minister assured the OMCs that Rs 35,000 crore of the fuel subsidy bill will be rolled over from the fourth quarter of the current financial year to the next fiscal.

However, even after the budgetary support, the OMCs will be left with an estimated unmet under-recovery of around Rs 8,200 crore in 2013-14.